The fintech revolution is reshaping the financial services landscape in 2024, innovating traditional banking and consumer finance. Fintechs are using technology to build seamless, accessible, and personalised financial experiences, which are much more pleasant for consumers. They are also defying traditional banking models by extending financial inclusion globally. For anyone interested in working in Finance, it is important to understand how technology and financial services are growing more intertwined, and the impact that this is having in the market.
Fintechs have come to replace the traditional banking system with digital defaults, setting new standards in terms of user experience and convenience. Neobanks like Chime or SoFi introduce to the customer more instinctive mobile application formats through which the clients can reach no-fee accounts and instant payment options. These digital banks are attracting millions of users, causing traditional banks to innovate and adopt similar features to stay competitive.
Another area where significant advances are being made is open banking. They work by leveraging APIs (Application Programming Interface: a set of rules and protocols that allows different software applications to communicate with each other) among financial institutions and other third-party providers to make data sharing possible. This system allows consumers to have more control over their financial data and access a greater range of financial products.
Despite Fintech companies having significant positive impacts in various areas, they also face challenges. One of the challenges being Data Security where, in 2021, there were 1,862 data breaches with an average cost of $4.24 million. Companies recognize that this issue can cost them both their reputation and money, so they are continuing to develop methods to mitigate it. Common approaches are implementing two-factor authentication, biometric authentication, and performing regular penetration tests.
However, the fintech industry is set for continued growth, with projections suggesting it could reach $1.5 trillion in annual revenue by 2030. Research from McKinsey indicates that revenues from these companies are estimated to grow almost three times faster than those in traditional banking sectors from 2022 to 2028. In conclusion, the Fintech Revolution is something important to research and understand as it presents opportunities for both new entrants and established players to thrive in a rapidly evolving market.
